Elusive light at the end of tunnel for OraSure

HIV testmaker's stock tanks despite achievement of longtime goal.

OraSure Technologies' balance sheet bled red ink for the better part of a decade. What sustained the Bethlehem company was the promise of over-the-counter sales of its OraQuick HIV test.

OraSure worked tirelessly toward winning federal approval to place the test on store shelves. All the while, investors eagerly awaited the big payoff they expected to accompany achievement of this goal.

Turns out they'll have to wait little longer.

A half-year after getting the greenlight from the U.S. Food and Drug Administration and more than three full months since shipping OraQuick to the likes of CVS, Walgreens and Rite Aid, OraSure has posted yet another quarterly loss and its stock price has nose-dived.

On Monday, TheStreet, a financial website, downgraded OraSure from hold to sell. "The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and weak operating cash flow," TheStreet wrote.

By Tuesday, OraSure's stock price had dipped below $6 for the first time in two years. The stock closed Wednesday at $5.83 a share, down 58 percent since early July, when it peaked at $14.01.

Some of that volatility has more to do with the stock market and investor mentality than with OraSure's performance, cautioned industry analyst Jeffrey Frelick at Canaccord Genuity, an investment bank in Boston.

He said short-term investors tend to bid up the price of a stock in advance of a major announcement, such as approval of over-the-counter sales. They are also apt to overreact to a quarter or two of unexpected bad news.

"We're comfortable that OraSure [will perform] well in the coming quarters," he said.

In an interview Wednesday, OraSure CEO Doug Michels declined to comment on his company's stock price. However, he said OraQuick sales are growing quickly and will help OraSure swing to profitability at some point.

Performed with an oral swab, the $40 OraQuick test can detect in saliva the virus that causes AIDS, producing results in 20 to 40 minutes. The potential market for such a product is sizable.

About 1.2 million people have HIV in the United States, and about 20 percent of them are not aware of it, according to estimates by the Centers for Disease Control and Prevention. Those who are unaware contribute to 50,000 new infections annually, the agency estimates.

Nonetheless, OraSure reported last week a loss of $5.9 million, or 11 cents per share, for the quarter ending Dec. 31, compared with a profit of $115,000 in the same period a year earlier. Michels attributed the bulk of the loss to increased spending on OraQuick promotion.

"We just launched this product … . This is a journey," he said. "We're spending a great deal of money to get the word out … and obviously, that has impacted the bottom line in the near term."

OraSure initiated its TV advertising campaign for OraQuick in December, buying airtime on major cable networks, including MTV, A&E, BET, E!, Bravo and Logo, as well as on NBC during an installment of the nation's No. 1 rated reality show, "The Voice."

In October, the company hired former NBA star Magic Johnson to serve as a pitchman. He appeared up and down the TV dial — on CNN, Fox News and "The Daily Show with Jon Stewart," among other shows.

The multi-pronged strategy, which also includes a social media component, is already having an impact, according to Michels. He said more than a half million people visited OraQuick.com as OraQuick sales increased 30 percent from November to December and 40 percent from December to January.

"We remain very confident that it is going to remain a very positive investment," he said.